Can You Count on Receiving Social Security Benefits?
YES! And the expenses! Many people we encounter disregard Social Security completely when planning their retirements. They know our entitlement system is unsustainable, and they rightly fear or even assume that the government will break this promise too. This belief is understandable. However, this is a simplistic analysis of Social Security, and inaccurate assumptions lead to flawed retirement planning.
The likelihood is that Social Security will continue to be a benefit for the rest of your life. For one thing, Social Security will never completely go bankrupt because it is funded by taxing wages. Do you suppose the government will stop taxing wages? If not, then a revenue source for Social Security will always exist.
Next, how many Americans want their Social Security? All of them! How many vote? Do retirees and future retirees represent a formidable voting bloc to politicians? So, if upwards of 150 million voters don't want to lose their Social Security, then you can probably count on our elected officials perpetuating this entitlement - even if we can't afford it and it is unsustainable in its present form.
In fact, would you believe some elected officials even think it a good idea to expand this benefit? See the article below, Adding to Social Insecurity.
If, for some inexplicable reason, you are counting on Social Security as a reliable or substantial source of income - like all too many Americans - we recommend a mental health checkup. When first signed into law in 1935, there were 42 workers supporting every retiree. Further, retirees only managed to live a few years after they started receiving payments. The system was designed as a safety net for very few people, for a very short period of time. Now, there are less than 3 workers for every retiree, and on average these retirees will consume the benefit for 20 years!
Perhaps you're still too skeptical about Social Security to consider it in your retirement planning. You're right to feel that way. Social Security in the future may look quite different than it does today. Benefits may be decreased, the age at which seniors can collect benefits may be increased, benefits may be means tested, etc. Changes will occur, we just don't know which changes. However, there is always something we can count on and of course that is taxes. Social Security benefits are taxed in retirement for anyone making a minimum amount of income. So, even if you're the most skeptical person on earth, and you refuse to consider Social Security benefits in your planning, you still need to consider the liability, which is that any benefits will add to your taxable income in retirement.
The vast majority of Americans fail to maximize this benefit, unclear about which age is best to start collecting Social Security, or how faulty decision-making can deprive one's spouse of tens of thousands of dollars of potential benefits. Arieff Consulting can help you you clarify how you can maximize this benefit.
Additional Resources
Adding to Social Insecurity (Wall Street Journal, requires subscription)
In 2018, the Social Security trustees said that fixing the current Social Security shortfall would require an "immediate and permanent" payroll tax increase, a 17% benefit cut, or a mix of both. Yet Congress proposed to raise benefits for seniors - a powerful voting bloc that least needs the boost. Who would fund this? Future seniors: you, your children and grandchildren. Sadly, those who will get hurt the worst all have something in common: they're not old enough to vote...or haven't even been born.
How Long Can Social Security Survive?
With a $12.5 trillion shortfall, benefits would have to be cut up to 23% across the board to sustain payouts through 2091...